Math 400A - Lycoming College



Math 400 - Theory of Interest NAME:__________________________________

Homework #11

1. A bank pays 6% interest compounded monthly. If a man deposits $300 at the beginning of each quarter for 6 years, find the accumulated amount at the end of 6 years.

2. An annuity will begin semi-annual payments in 6 months and continue for 5 years (i.e., for a total of 10 payments). The first payment will be $5,000, and each payment will be $500 less than the previous payment. Find the present value of the annuity, if

a) the interest is 9% compounded semiannually.

b) the interest is 9% compounded monthly.

3. A bank pays 6% interest compounded quarterly. If a man deposits $100 at the beginning of each month for 6 years, find the accumulated amount at the end of six years.

4. A two-year rental agreement calls for a monthly rent payment due at the end of each month. The first month’s rent is $500, and the rent increases by $10 each month. Assuming 6% interest compounded monthly, find the present value of the rent payments.

5. At the beginning of the month, a man borrows $5000 at 6% interest compounded quarterly. In order to pay off the loan, he plans to make monthly payments at the end of each month for six years. Find the monthly payment.

6. At the beginning of the month, a man borrows $50,000 at interest compounded monthly. In order to pay off the loan, he plans to make payments of $900 at the end of each month for six years. Use the Interest_Solver Excel spreadsheet or some financial function on a calculator to find the nominal rate of interest i(12).

7. There is $50,000 in a fund which is accumulating at 5% per annum convertible continuously. If money is withdrawn continuously at the rate of $5,000 per year, find how long will the fund last.

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